Sebi implements measures to revive mutual fund industry

MUMBAI: Market regulator Sebi today announced implementation of a number of steps for the benefit of mutual fund industry, including an additional levy on investors for catering to smaller cities and availing the services of a whole new class of persons as distributors.

As per the proposals approved by Sebi's board on August 16, the Securities and Exchange Board of India (Sebi) said, a number of steps are being taken to increase the penetration of MF and to energise the distribution network while protecting the interest of investors.

Among the measures announced today, the MFs can charge up to 30 percentage points of additional TER (Total Expense Ratio) -- a fee charged to investors for MF investments under fund management and other heads -- if the new inflows from beyond top 15 cities are at least 30 per cent of gross new inflows in the scheme or 15 per cent of the average assets under management (year to date), whichever is higher.

The top 15 cities would be decided on the basis of data compiled by the Association of Mutual Funds in India (AMFI) data for 'AUM by Geography - Consolidated Data for Mutual Fund Industry' as at the end of the previous financial year.

MFs would need to make complete disclosures in their half yearly report to Sebi regarding the efforts to increase geographical penetration and the details of opening of new branches, especially those beyond top 15 cities.

In another step, Sebi has allowed MFs to charge service tax on investment and advisory fees to the scheme.

Also, MFs have been asked to launch schemes under a single plan and ensure that all new investors are subject to single expense structure. Existing schemes with multiple plans can accept fresh subscriptions only under one plan and other plans will continue till the existing investors remain invested in the plan.

Sebi also asked MFs to provide a separate plan for direct investments (investments not routed through distributor) in existing as well as new schemes. Such separate plans shall have a lower expense ratio excluding distribution expenses and commission, and no commission shall be paid from such plans.

The Sebi directive for direct MF investments would be effective from January 1, 2013, while all other measures would come into effect from next month, or October 1, 2012.

Regarding distribution of mutual fund products, Sebi said that all the agents or distributors of MF units are required to obtain certification from the National Institute of Securities Markets (NISM) and registration from AMFI.

A new cadre of distributors, such as postal agents, retired government and semi-government officials, teachers and bank officers with a service of at least 10 years, and other similar persons (such as Bank correspondents) may be allowed to sell units of simple and performing mutual fund schemes.